ConocoPhillips is curtailing spending and production, cutting 225,000 barrels a day from its North America wells, as the price of oil drops and as the world is running out of places to store it.
Alaska North Slope crude oil traded under $16.65 a barrel, reaching lows not seen since 2002. North American producers have seen a 30 percent drop in demand and nearly a 70 percent drop in prices since January.
For Alaska, the announcement means the company will cut back another $200 million in planned investment.
Today’s announced actions include these points made by the company in a news release on its website:
- An additional reduction in 2020 operating plan capital expenditures of $1.6 billion, bringing the current estimate to $4.3 billion. Including our previously announced reduction of $0.7 billion, this represents a total reduction in operating plan capital expenditures of $2.3 billion, or approximately 35 percent, compared to the 2020 announced guidance. These reductions are sourced from across our global portfolio, primarily focused on Lower 48, Alaska and Canada areas where we have the highest levels of flexibility.
- A reduction in operating costs of approximately $0.6 billion, representing roughly 10 percent of the initial 2020 guidance. This brings the current estimate to $5.3 billion. These reductions were sourced from lease operating expenses, general and administrative costs and foreign exchange impacts.
- The company’s share repurchase program has been suspended.
- On a combined basis, the cumulative capital, operating cost and share repurchase actions represent a reduction in 2020 cash uses of over $5 billion versus original operating plan guidance.
- The company also announced it will elect to curtail production in Canada and the Lower 48 regions until market conditions improve.
- At Surmont, the company is currently cutting back production due to low Western Canada Select prices. By May, the company expects to reduce production by approximately 100,000 barrels of oil per day (BOD) gross to 35,000 BOD gross.
- In addition, beginning in May, the company plans to begin curtailing production across its Lower 48 region. Initially, the company expects to curtail about 125,000 BOD gross. Curtailment decisions will be made on a month-to-month basis, and are subject to operating agreements and contractual obligations.
- These announced curtailments represent approximately 200,000 barrels of oil equivalent per day (BOED) net to the company.
- Given ongoing uncertainty, continued market volatility and the potential for both voluntary and involuntary curtailments over the coming months, the company’s previous 2020 guidance items should not be relied upon and further guidance will be suspended.
The announcement came about a week after the company announced it was demobilizing some of its drilling rigs and crews in response to the COVID-19 pandemic.